Canal Construction on Thai Isthmus (CANALTH)

CASE NUMBER:     201 
CASE MNEMONIC:   CANALTH
CASE NAME:       Thai Canal Isthmus

A. IDENTIFICATION

1. The Issue

The two-hundred year old dream to build a canal across Southern
Thailand's narrow isthmus has been revived again and again, notably
in the mid-1950s, early 1970s, and most recently in the mid-to late
1980s and now 1990s. It is in the last period that the effort came
closest to fruition and that which the actors involved were most
vigorous in their pursuits. There have been numerable obstacles to
its construction ranging from perpetual political haggling, to
military incursions, to the necessary financial resources
(Katigbak: Reuters Nov 5, 1983). But one thing is for certain, in
the 21st century two-thirds of the world's population will be
concentrated in the western Pacific and East Indian Ocean area
making the need for efficient and effective trade all the more
necessary (Jiji Press Ticker: Dec 6, 1983). 

2. Description

If the Kra canal ever became a reality it would be the world's
third major man-made waterway after the Suez and Panama canals,
which historically are two of the most vital security concerns for
the world community of nations. The Suez has tremendous political
significance to Israel, Egypt and the rest of the Middle East.
Likewise, the Panama canal has been the source of some of the most
rancorous foreign policy debates of U.S. history. Canals in general
represent one of the greatest manmade structures that can bring
nations to the brink of war, as was the case for both Panama and
Suez. So such a canal would pose another security concern,
especially for the Asian powers to the north.

In the 18th century King Rama I of Thailand first pronounced the
desire to dig a canal across the southern isthmus of Thailand so
as to join the Indian and Pacific Oceans (Katigbak: Reuters Nov
5, 1983). In the early days, the King thought the canal would
provide the necessary avenue through which Thailand's Navy could
act most successfully in resisting continual insurrections and
invasions. Today the canal is seen by Thai's as an excellent
means to raise capital to further propel its massive
industrialization and development efforts, while other nations,
most notably the developed Asian nations to the North see the
canal as a means of shipping goods and oil efficiently and more
cost effective than through the traditional channel (the Straits
of Malacca). Through the years the issue has vacillated in the
minds of politicians and businessman. 

It was in the 1950s that the purpose of a canal for economic
purposes was first proposed. The effort culminated in little
more than the creation of preparatory plans (Katigbak: Reuters
Nov 5, 1983). These plans envisaged a 500 meter wide, 103
kilometer long canal. Besides the dimensions of the canal very
little substance in regards to the actual methods to construct
the canal were articulated. After some consideration by the
government the idea was shelved. At this time the expense of
such a canal would rest on the Thai government who at the time
was a non-industrialized nation with a commodity exporting
economy. Therefore, there was very little feasibility but it
signified a vision for future Thai involvement in global
trade.

The plans were revived some twenty years later. But again the
issue came to nothing because student riots in 1973 brought
down the military government of General Prapass Charusathira
(Katigbak: Reuters Nov 5, 1983). This was indicative of Thai
history until the final student led coup of 1990 that finally
removed the military from the political strings of Thai
government, in that now a multiparty civilian led system of
government is well entrenched. Such instability provided a
context of short-term reaction to political and economic
matters; clearly not a system for the long-range thinking
necessary for a monumental engineering effort.

Ten years later the South East Asian region has a whole became
interested in the project. The idea of a canal became more
feasible because by 1983 many of the economies of Asia began
to develop in so doing industrialization became the central
instrument. Thus the need for a canal for trade purposes
became realistic and more cost effective.

It was at this time when heightened Japanese interest began to
spur the project forward. A well-connected Japanese think tank
began considering the matter seriously. The head of the
Mitsubishi Research Institute (MRI), Masaki Nakijima,
recommended the building of the canal to facilitate Japan's
ever-increasing need for easy and inexpensive access to oil
from the oil producing states of the Middle East (East Asian
Executive Reports: Aug 15, 1983). The MRI estimate to
construct the canal was $3 billion. Many in the Japanese
government initially opposed the effort for two reasons. 

First, the current relative inexpense of oil would not make
the canal cost efficient, oil prices would have to skyrocket
before the canal would be truly feasible. And second, and even
more importantly, the terrain through which the canal would
pass consists of granite whose excavation would add
appreciably to the projects costs (East Asian Executive
Reports: Aug 15, 1983). 

In 1983, the Thai government became more intensively engaged
in the issue. During this time of fledgling Thai
industrialization and development, the prime Thai mover in the
canal plan was Harn Leenanond, Commander of the Southern Based
Fourth Army. His historic notoriety has been his pacification
of the long enduring and recalcitrant insurgents on the
Thai-Malaysian border (Jiji Press Ticker: Dec 6, 1983). The
implications of such leadership will be addressed later in the
culture section.

On Harn's initiative a national symposium was held to debate
the matter. This was followed in October 1983 by an
international seminar to discuss the project. Former U.S.
Presidential Adviser Gene Robert LaRoque, then Director of the
Center for Defense Information and head of a special committee
investigating the scheme explained that the Southern region of
Thailand would benefit (Jiji Press Ticker: Dec 6, 1983). Under
the leadership of the U.S. representative the canal's route
was determined among the eight proposals. He estimated the
cost would range from $10-12 billion. Thus there was a
tremendous disparity between U.S. and Japanese estimates. In
addition it was presciently predicted at the seminar that the
current avenue for shipping in the region (Straits of Malacca)
would countenance tremendous traffic in its shipping lanes. As
of 1988 The Straits of Malacca are the most traveled straits
in the world due to its proximity with the world's largest
transit shipping port, Singapore (EIU Yearbook 1990). 

The most important issues not addressed at the Bangkok seminar
involved the massive foreign investment necessary to complete
such a monumental project and a time line for construction. 

In 1985, the first pronouncements of actual construction of
the canal were advanced. These plans bared importantly upon
the environment of the area under consideration. The
Mitsubishi Corporation of Japan believed it had the technology
to build such a canal and that it would tender for a contract
to do so. However, Mitsubishi's plan was not met
enthusiastically when the environmental costs of their plan
was put forth. Mitsubishi believed that excavation would be
best achieved by twenty or so small underground nuclear
explosions, each explosion approximately twice the power of
the bombs dropped on Japan in 1945. The Japanese involved in
the project declared the use of fusion technology as "clean",
a view rejected by the Thai scientists involved in the project
(Reuter textline: Jan 6, 1985).

At this time financing plans began to take shape. According to
Pakdee Tanapura of the New York based Fusion Energy Foundation,
the Kra canal could be built through financing by highly
industrialized states for about $10 billion. His plan advocated
the establishment of a 7.5% interest rate which Thailand could
repay the investment plus interest in twenty-one years alone
through the collection of toll (Reuter textline: Jan 6, 1985).
Therefore, Pakdee's financing plan placed the burden of
repayment upon Thailand alone.

Bunyaraks Ninsananda, of the National Economic and Social
Development Board of Thailand (NESDB), argued against the
plan for this reason. In 1985 Thailand was still primarily a
commodity exporter depending primarily on rice, and that the
high volatility in the oil market presented the financing
plan as too risky for the Thai government to undertake
according to these terms.

Also in 1985 the Mitsubishi Research Institute (MRI) called
upon two American "private concerns" (corporation) to create
the Global Infrastructure Fund (GIF) (Jiji Press Ticker: May 2,
1985). The first project advocated was the Kra canal project.
This idea was more in line with the Thai government in that the
burden became globalized among new partners that were wealthier
and able to provide the massive foreign direct investment
necessary for the project. The Thai government subsequently
endorsed an official governmental feasibility study.

Despite greater interest and analysis of the issue the matter
was shelved for three years while Thailand rapidly
industrialized to the point that it was now one of the fasting
growing economies in the world, with annual growth rates near
double digits in the late-1980s (EIU Yearbook: 1990). Then in
1988 the security arrangements involved in such a project began
to draw increased attention.

As the Cold War was winding down, and a non-activist minded
Congress came into power in the U.S., it was believed that the
defense of open shipping in the Straits of Malacca, and the now
proposed Kra canal would no longer be fulfilled by U.S. forces
alone. Japan's Minister for Defense, Tsutomo Kawara believed
that any strategic challenges to shipping in the region would
be defended by Japan, the U.S., and the littoral states
involved (Jakarta Post: July 2, 1988). Hence, a caveat must be
made. Even though the Thai government has a mutual defense pact
with the U.S. (whom coincidentally has been a close U.S. ally
for years), America would not defend the canal alone. This
announcement worried Thai officials over the protection of the
highly prized and valued canal under planning.

Despite substantial security considerations the internal Thai
debate over the canal continued. In September, 1988, a Bill
passed the Thai parliament endorsing and implementing the
project, and by so doing a committee was established to monitor
progress (Lloyd's List: Sept 7, 1988).

With great optimism for the project came both political and
economic setbacks less than a year later. Thai Premier,
Chatichai Choonhaven, "poured cool water on the project"
because he believed that current oil prices were far too low to
make the canal economically feasible, instead he advocated the
construction of a pipeline across the Isthmus (Business Times:
Mar 14, 1989; P1). Although this would be much cheaper the
potential for an environmental catastrophe would be measurably
increased. The sheer number and regularity of ships loading and
unloading in the pipeline ports would increase the likelihood
of a possible spill; not to mention the possibility that the
pipeline could rupture from natural or manmade actions.

Eight months later the Prime Minister endorsed a new project
thereby abandoning the canal project. To appease foreign
investors and domestic constituents who were concerned
regarding the security, financial, and environmental
implications the canal would bring, began to seek an
alternative plan. Premier Choonhavan endorsed a land-link
project that would consist of an elaborate port, railways, and
a state of the art oil and gas pipeline that would handle the
transport of 2 million barrels a day (Japan Economic Newswire:
Nov 30, 1989). 

The new plan sought to transect the same isthmus as the canal.
Most sources believe that the primary motivation was not in
regards to the potential environmental costs associated with
the construction and operation of the canal rather the goal was
to manage the same tasks at a far lesser cost thereby relieving
Thailand from the economic burden the initial project cost
would bring. Financing for the land-link project consists of a
$1.5 billion loan from the World Bank (Japan Economic Newswire:
Nov 30, 1989).

The Canal project began to face increasing Thai opposition not
long after the announcement of the new land project. Much of
this criticism was directed toward those who were the primary
advocates of the canal. Dr. Kazuo Sumi of the International
Movement Against All Forms of Discrimination and Racism (IMADR)
was the leading opponent, but not just in regards to the canal.
He criticized the Japanese government for supporting
development projects solely for private interest without taking
into account humanitarian and environmental concerns. He cited
the Japanese Construction Ministry for undertaking feasibility
studies in global projects that if completed would cost over
$50 billion, which the canal was one; and that no forecasts or
studies had been established to calculate the environmental
costs.

Dr. Sumi and Dr. Vitit Muntrabhorn, another critic of the canal
and Associate professor at Chulalongkorn University, believed
that international bodies have not acted with aid recipient
countries such as Thailand in mind when giving loans for such
development projects. They contend that organizations such as
UNICEF, ILO, WHO, and FAO have participated in environmentally
sound projects, while the IMF, World Bank, and 
the UNDP have not incorporated such a standard (Bangkok Post:
Mar 20, 1990; P5).

The debate initiated by the two key figures brought both
greater international attention to large scale development
projects, as well as the humanitarian end environmental costs
that are often associated. The message associated with Dr. Sumi
and Dr. Muntrghorn gained increased favor in Western academic
and media circles.

We now have the opportunity to assess the Megaprojects of the
1970s and 1980s, both in terms of their environmental impact as
well as their more focused intent (that being the establishment
of successful and sustainable development). Many of the past
projects ranging from ports to highways to dams, have all
virtually accompanied substantial environmental damage. Many
side effects of the Megaprojects have ranged from razed
forests, disappearing fisheries, spreading deserts (Pearce:
P25). Therefore, the ability of a nation, or even community of
nations, to advocate and implement the construction of a
project, especially one the size of the Kra Canal, would surely
meet a higher and tougher wall of opposition on environmental
grounds. 

This would be compounded in the Thai case in that throughout
the time span that accompanied the canal debate, Thailand
successfully developed and industrialized without it! Despite
the failure of the canal project much progress has been made in
shifting the approach and substance of the debate involved in
such megaprojects. The World Bank has come to the realization
that Megaprojects do not necessarily equate with development.

The Japanese Mitsubishi Research Institute one of the original
architects of the Kra canal plan have now adopted a new tactic
in their approach. MRI in association with the Global
Infrastructure Fund Research Foundation have adopted a new
strategy of incorporating the domestic debate into development
and investment plans such as the canal. The following quote
poignantly articulates this new vision:"We will take a positive
approach in working to improve the environment as well as
raising standards of living...If we find a project promising,
we will appeal for cooperation from other countries and from a
multinational team."--Norio Yamamoto, Research Director at the
Mitsubishi Research Institute (Yano: 8). 

3. Related Cases

There are numerous other cases in which a proposed canal became
a reality (See PANAMA case, or HIDROV case). In addition, there are several
other examples available to assess the effectiveness and
realities of megaprojects in the following cases involving
dams: the most common megaproject (See ATATURK case, or the ISRAELH2 case) and the PANAMA CASE.

Keyword Clusters

(1): Trade Product = All Shipped goods
(2): Bio-geography = [TROP] & [OCEAN]
(3): Environmental Problem = [POLL]&[POLS]

4.   Draft Author: Kevin Kunkel

B.   LEGAL Clusters

          This case lacks legal issues that are typical in
cases involving cross-border trade that has environmental
ramifications. The canal was negotiated among a consortium of
private interests with the Thai government reserving ultimate
decision over the authority. Additionally the canal has never
been built which has prevented any litigation or legal
discourse. 

5. Discourse and Status: DISagreement and INcomplete

6. Forum and Scope: Thailand and Multilateral

7. Decision Breadth: 3+ (Thailand, Japan, US [3 primary])

8. Legal Standing: LAWC. GEOGRAPHIC Clusters

9. Geographic Locations

     a. Geographic Domain : Asia

     b. Geographic Site   : South East Asia 

     c. Geographic Impact : Thailand, Gulf of Siam

10. Sub-National Factors: NO

11. Type of Habitat: [TROP]

D. TRADE Clusters

12. Type of Measure: TRANSportation

13. Direct vs. Indirect Impacts: INDIRECT

14. Relation of Measure to Environmental Impact

     a. Directly Related : NO
     b. Indirectly Related : YES  TRANSportationm
     Economic sectors such as timber and other commodity 
trade may become more economically viable thereby making
economic exploitation of the region easier. The shipping
traffic would also be injurious to several rare plant and
animal species (detailed below). 
     c. Not Related : NO
     d. Process Related : YES  HABITAT Loss
     The most controversial aspect is the means of canal 
construction. The preferred method of planners is through
underground nuclear explosions. This would pollute both the
land from which the canal is dug and would therefore
contaminate nearby shores with radioactivity.  In addition, the
creation of a canal would harm one of the most pristine coral
reef ecologies in the world. For example, the Andaman See and
the Gulf of Thialand, the two waterways to be affected, are
home to one of the rarest known species of Tomato Clownfish.
And, as is the case with Clownfish, their nesting homes are
anemones, of which, these two species are alone indigenous (WWF
Annual 1985). 

15. Trade Product Identification: CANAL

16. Economic Data

17. Impact of Measure on Trade Competitiveness: HIGH

The means of construction poses the most significant factor in
terms of cost. Estimates range from $3 billion on the most
crude means nuclear means, to $15 billion for the more
conventional and more time consuming excavation methods. In
essence, the cost of the plan poses a 100% price effect in
determining the canals fate. 

18. Industry Sector: TRANSPORT

19. Exporter and Importer: All active global trading partners

E. ENVIRONMENT Clusters

20. Environmental Problem Type: [POLA]&[POLL]

21. Name, Type, and Diversity of Species 

22.  Impact and Effect:  LOW and STRCT

23.  Urgency and Lifetime:  LOW, 200+ years and currently

24.  Substitutes:  OTHER-Pipeline

Substitutes to the canal are limited but detailed near the end
of my analysis, such as the land-link project.VI. OTHER Factors

25. Culture: YES

26. Trans-Border: NO

27. Rights: YES

Early support from the canal originated from the military who
sought the canal and a physical instrument to constrain the
activities of the Separatist Muslim and ethnic Malays in the
Southern most provinces (Business Times: Jan 6, 1985).
Likewise, despite their small numbers in the areas surrounding
the projected route, these populations would be forced to move.

28. Relevant Literature

References